Relevant and even prescient commentary on news, politics and the economy.

The Perfect Negative Indicator Weighs In

Alan Greenspan:

The U.S. Federal Reserve has done all it can do to reduce unemployment and needs to worry more about the risk of inflation from the stimulus it poured into the economy, former Fed Chairman Alan Greenspan said on Sunday.

But didn’t we just Get All That Money Back? [link added]

Greenspan’s reason unemployment will go down soon: GOVERNMENT JOBS:

Greenspan said he expected the U.S. unemployment rate, which is currently at 10 percent, to “be significantly lower a year from now” but still very high.

The U.S. Census Bureau’s plan to hire close to 800,000 workers by April will take several tenths of a percent off the unemployment rate, he said.

Let’s ignore that 800,000 temporary hires won’t balance the 900,000 jobs to be lost on the state level next year (h/t Brad DeLong) And let’s ignore that temporary jobs are, by definition, “frictional” and not “structural” employment.

But let’s not forget, as Ben Bernanke did,* that, as noted by Dean Baker, “the dual mandate [of the Fed] is full employment (defined as 4.0 percent unemployment) and price stability.” [emphasis mine].

10.0% is not 4.0%. Indeed, 9.3% (10.0-0.7) is not 4.0%. So unless there is a miraculous 5.3% of other employment coming Real Soon Now (and I don’t even see Daniel Gross predicting that, let alone Mark Thoma or Paul Krugman), the Fed, as has been standard under Bernanke, is missing its targets.

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The jobs of tomorrow…?


For the sake of argument, jobs in our future over the next few years or so appear to be in the health care industry and education. Jobs needing less education than a BA are among the fastest growing.

Where are tomorrow’s jobs going to come from? The question is more urgent than ever, with official unemployment hovering around 10 percent and with nearly one in five Americans unemployed, if you count part-time workers who want full-time jobs and people so desperate that they have given up looking for work entirely.

Most popular discussion about jobs focuses on the effects of offshoring of manufacturing jobs to China and other countries, many of which, like China, manipulate exchange rates and use subsidies to promote their industries. Combating predatory trade practices and rebalancing global trade by means of higher U.S. exports is important, in the short and medium term. But in the long run technologically driven productivity growth is the most important factor in shaping employment in the U.S. and every country in the world.

Productivity and innovation are the catch words, and examples demonstrate how this has worked in the last century. But if policy makers need to craft a response to mitigate the changes, and re-training happens, what is it going to be?

The emptying of the cubicles won’t result in permanent mass unemployment, the present prolonged crisis notwithstanding. As it has always done in the past, labor will shift from more mechanized to less mechanized sectors. But what will those jobs be?

The aging of the boomers accounts for only 10 percent of the growth. The rest comes from increasing demand. That’s because productivity growth in agriculture, construction and manufacturing has greatly reduced the cost of food, shelter and appliances. In the U.S. and similar nations, the freed-up income tends to be used on quality-of-life goods, of which healthcare is the most important.

…the economist Robert Fogel, “Just as electricity and manufacturing were the industries that stimulated the growth of the rest of the economy at the beginning of the 20th century, healthcare is the growth industry of the 21st century. It is a leading sector, which means that expenditures on healthcare will pull forward a wide array of other industries, including manufacturing, education, financial services, communications and construction.”

Another widespread myth holds that most Americans need to go to college in the future. In reality, most of the fastest-growing jobs, including those in healthcare, do not require a four-year bachelor’s degree. According to the Council of Economic Advisers: “The categories with some education required beyond high school are growing faster than those not requiring post-secondary schooling.

None of this means that we don’t need world-class scientists and engineers, or that we don’t need to rebuild our manufacturing export industries, or that we don’t need to hire people to design and build up-to-date infrastructure and energy systems. High-tech agriculture, manufacturing and infrastructure and related business and professional services will remain essential to economic dynamism. But thanks to ever smarter machines, fewer and fewer people will work in the primary (field), secondary (factory) and tertiary (office) sectors. Most of the job growth will be in the “quaternary” sector of healthcare and other qualify-of-life services.

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